This study addresses multiple social issues in order to regenerate collapsing rural regions and realise environmentally friendly economic growth from a standpoint of watershed-based management. It is difficult for a single agricultural community to revitalise itself and therefore, such a community needs to seek cooperative management involving other regions and industrial sectors. In this case study from Japan, a watershed dynamic computable general equilibrium model is developed, coupled with an environmental emission model regarding the water quality and agricultural policy model. The effect of agricultural subsidy policy on watershed economic growth and a water pollutant of chemical oxygen demand (COD) emission reduction are examined. Furthermore, long-term behaviour of sectoral production and COD emission is investigated to elucidate the mechanism of sectoral allocation of COD emission. Finally, this study discusses a successful way of accomplishing positive agricultural and watershed economic growth and of generating the corresponding cooperative relationships among sectors.

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